Guarantor Mortgages and Borrowing Limits

Find out how much you can borrow on a guarantor mortgage and how to secure the best rate

Home Guarantor Mortgages Guarantor Mortgages And Borrowing Limits
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: March 15, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 15, 2024

In this article, we’ll help you work out how much you might be able to borrow with a Guarantor and we’ll look at how a broker can help you get the best deal.

What is a guarantor mortgage?

A guarantor mortgage can help a borrower purchase a home if they have no deposit or their financial circumstances would normally put a lender off. Also known as a family-assisted mortgage, these agreements typically require a family member to act as a guarantor for the mortgage, which means they must step in to make any payments if the borrower cannot do so.

The role of the guarantor

The person acting as guarantor for you takes partial responsibility for your mortgage. This means that they may be liable to make any mortgage payments you can’t meet. It also means they will either need to secure the home loan against a property they already own or place a lump sum into a savings account held by the lender – read on for more information about this.

There are 2 types of a guarantor:

Whole loan guarantor: This is the most common. Most lenders will require the guarantor to accept responsibility by providing cover for the whole of the mortgage. This means that the parent guarantor would have to be able to prove they can afford the entirety of the loan. If a borrower requires a mortgage of 140k but can only prove to afford 110k, the guarantor would still need to have ample income to cover the whole 140k. This may not be possible for some guarantors, especially as the lender will also take into account any other outgoings such as their own mortgages and other credit commitments.

Shortfall guarantor: Rare, but a possibility with some lenders, a shortfall guarantor will be required to cover the surplus or remaining amount that the borrower can’t afford. For example, if a borrower needs a mortgage of 140k, but can only afford 110k, the guarantor would have to prove that they can afford the outstanding 30k.

A guarantor for a mortgage may have to secure the loan against either:

  • A property of their own: The lender will hold a charge on the security property, meaning the guarantor of the mortgage could potentially lose it through a repossession if the borrower misses too many payments.
  • Their savings: The mortgage loan guarantor places a lump sum from their savings into an account held by the lender. They cannot withdraw from this pot for a set number of years (usually between 3 and 5) or until a certain amount of the mortgage loan has been repaid. Savings will usually accrue some interest while held in the lender account.

Can you get a bigger mortgage with a guarantor?

Yes, it’s possible. Usually, the main reason for wanting a guarantor mortgage is because you have a low income, or sometimes none at all, and otherwise wouldn’t be able to borrow what you need.

With a guarantor mortgage, the mortgage application is assessed on the basis of your guarantor’s income, so you’ll be able to borrow more than you would on your own.

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How much could you borrow?

As with any kind of mortgage, this depends on several factors and is never a one size fits all answer. Even though they won’t have a stake in the house, your guarantor will be assessed as they would for any mortgage application. So their income, financial commitments, age and credit history will all be considered.

The maximum loan amount will be capped by most lenders at 4.5 times your guarantor’s income, although in some cases you might be able to get 5 times or more, depending on the lender and your broader financial picture.

With a guarantor supporting you, your chances of securing a higher income multiple could be greater than if you were applying on your own.

Use the calculator below to get a rough idea of your maximum borrowing.

Guarantor Mortgage Calculator

Use this calculator to determine how much you could potentially borrow for a mortgage, based on the typical salary multiples used by most UK lenders.

Input full salaries for all applicants
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Your Results:

You could borrow up to 

Most lenders would consider letting you borrow

This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.

Some lenders would consider letting you borrow

This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.

A minority of lenders would consider letting you borrow

This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.

Get Started with an expert broker to find out exactly how much you could borrow.

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How a broker can help with a guarantor mortgage

If you’re looking for a guarantor mortgage because you’re on a low income and struggling to find a lender then the support of a broker who specialises in this type of home loan really will be invaluable. They’ll be able to look at your personal finances, take you through all your options and advise you of anything you could do to make yourself a more attractive proposition to lenders.

Although it can feel impossible, there are actually a lot of ways to get on the property ladder with a low income. A specialist broker with access to the whole of the mortgage market will be able to find you both the best product and the best rates for your situation, helping turn your property ownership dreams into reality.

If you get in touch we’ll arrange for a guarantor mortgage specialist we work with to contact you directly for a free, no obligation chat.

Some of the lenders available

The following UK lenders are among those who are known to offer guarantor mortgages…

  • Bath Building Society
  • Kent Reliance (Subject to affordability and the age of the guarantor)
  • Vernon Building Society (Borrower must be able to afford 70% of the mortgage payments)
  • Swansea Building Society

Eligibility requirements

Most lenders will determine affordability and eligibility based on the following factors:

  • Income and how the borrower is employed. Obviously, the more you earn, the better; but having a guarantor can offset the risk if the borrower has low income. Those who are self-employed or supplement their income with things like regular bonuses and commissions may need a specialist lender.
  • Deposit. The minimum deposit requirement is usually 5% for a residential property or 15% for a buy-to-let. However, having a guarantor means you may not need to stump up any deposit.
  • Credit rating. Borrowers with a poor credit rating may need to find a specialist lender to ensure they end up with the best rates.
  • Age. Some mortgage providers have strict upper and lower age limits.
  • The property type. A specialist lender might be needed if the property you’re buying has ‘non-standard’ construction (e.g. thatched roof, timber frame).
  • The borrower’s outgoings. Significant outgoings, such as other outstanding loans or dependent children, can affect the amount you’re able to borrow.

Can you get a 100% mortgage with a guarantor?

Yes, it’s possible. 100% mortgages have become far less popular over the last 20 years because of the risk involved in having no deposit, so nowadays they tend only to be offered if you have a guarantor.

There are a few different ways of using a guarantor to get a 100% mortgage. Often it involves a charge against the guarantors property as security, but there are a couple of other ways of doing it:

  • A family deposit mortgage – this is when the guarantor puts up savings as security instead of a charge against their property. The cash is put into a savings account until an agreed amount of the mortgage has been paid off, at which point the guarantor gets their money back with interest.
  • A family offset mortgage – where the total loan amount is reduced by the guarantor’s savings. A family offset mortgage can either work by reducing the term of the loan or your monthly repayments.

Not all lenders will offer a 100% guarantor mortgage so it’s worth speaking to a specialist broker about your options.

Other ways to stretch your maximum borrowing

If you’re not comfortable with the idea of a guarantor mortgage or don’t have someone to act as a guarantor, there may be other alternatives to increase your borrowing limit and potentially get a bigger mortgage.

In the first instance check with your broker to see if there are small things you could do to increase your borrowing power, like clearing existing credit commitments or improving your credit rating. If you’re in a secure, long-term job and it’s appropriate timing, you could consider asking for a pay rise.

Offering a bigger deposit can also help you get a bigger mortgage. If you don’t have the money available yourself for this but have a close family member who is in a position to help with a cash lump sum then you could also consider a gifted deposit.

Get matched with a guarantor mortgage specialist

Working with a broker who specialises in guarantor mortgages is key if you’re looking to maximise your borrowing potential. They will have the experience and contacts you’ll need to stretch your budget as far as possible and all being well secure a property you love. They’ll be able to negotiate rates and find you the best deal – every penny counts when you’re on a tight budget.

Give us a call now on 0808 189 2301 or make an enquiry and we’ll quickly assess your needs and match you with a broker who will understand your circumstances and help you get the mortgage you need. All of the advisors we work with have been vetted by us, so you can speak to them with total confidence.

FAQs

A guarantor on any home mortgage loan might want to consider taking out income protection insurance. Doing so will ensure you are covered in the event of the borrower defaulting and of you being unable to cover the debt due to things like illness, injury or redundancy. It may also be a good idea to convince the borrower to take out similar cover themselves to help protect their position and, by default, your own.

Your lender decides this and you will not be able to remortgage to a non-guarantor deal until they give you the go-ahead. A guarantor would usually stay on the mortgage for an agreed number of years or until a specific amount of the debt is paid. If you miss any repayments, this term may be extended by the lender.

Whether you’re successful in removing your guarantor (assuming they’ve agreed to be removed) might come down to why you want to cut this tie. You will need to convince the lender that you have a legitimate reason, such as your financial situation changing for the better or the guarantor passing away.

If you open talks with your lender and tell them you wish to remove your guarantor, they will likely offer you one of the following options, depending on the circumstances:

  1. They will let you remove the guarantor altogether
  2. They will expect you to replace the guarantor with another
  3. They will ask you to pay off the loan or refinance it
  4. If your guarantor has died, they may allow you to use some of their estate to pay off part of the mortgage
  5. They will reject your request and refuse to allow you to remove the guarantor or change the terms of the loan

In theory, this is possible, but your choice of lenders will be restricted as many providers only offer guarantor mortgages to first-time buyers.

It may do. The act of becoming a guarantor will not usually impact on your credit rating. This will only be affected if the borrower defaults and you’re unable to pay the debt for them. Generally, your guarantor duties will be taken into account when your affordability is being calculated, which may reduce the amount you can afford to borrow even though you are not technically making any payments, regardless of how well conducted the mortgage is by the owner.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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